To amend the Internal Revenue Code of 1986 to provide tax relief and encourage economic recovery.

Amends the Internal Revenue Code to provide for the treatment of rental and nonrental real estate activities under the limitations on losses from passive activities.

Establishes a maximum capital gains rate of 17 percent on the sale or exchange of real property held for more than one year.

Allows a tax credit for individuals for the purchase of a personal residence. Limits such credit to $2,000, if the individual is a first-time homebuyer, and $1,500, if the individual is not a first-time homebuyer but the residence is newly constructed.

Allows an itemized deduction for losses incurred in the sale or exchange of a principal residence.